L3 Communications (LLL) NewsBite

Posted on Friday, May 02, 2008 9:04 AM

L3 Communications (NYSE: LLL) closed yesterday at $112.74. So far the stock has hit a 52-week low of $90.11 and 52-week high of $115.33. L3 Communications stock has been showing support around 110.93 and resistance in the 113.97 range. Technical indicators for the stock are Bullish and S&P gives LLL a positive 4 STAR (out of 5) buy rating. For a hedged play on this stock, look at a Jun '08 115 covered call (LLL FC) for a net debit in the $110.49 area. That is also the break even stock price for this trade. This covered call has a 50 day duration, provides 2.00% downside protection and a 4.08% assigned return rate for a 29.80% annualized return rate (comparison purposes only). A lower cost hedged play for this stock would use a longer term call option in place of the covered call stock purchase. To use this strategy look at going long the LLL Jan '09 80 Call (OOY AP) and selling the Jun '08 115 call (LLL FC) for a $32.35 debit. The trade has a 50 day life and would provide 0.35% downside protection and an 8.19% assigned return rate for a 60.00% annualized return rate (for comparison purposes only). L3 Communications has a current annual dividend yield of 1.10%. [IHF - Investors Observer]